The Moody’s Downgrades Hurt More Than Banks Will Admit

The big lenders would have you think Moody’s European bank downgrades are meaningless. Much ado about nothing.

But that doesn’t really stack up.

As soon as the news was out, the banks busily briefed that the kind of issues Moody’s raised in its report were old hat. Many pointed to the sterling work they had done beefing up their balance sheets and improving their risk profiles. RBS was one of the first to retaliate, branding the downgrades as “backward looking”.

There was even talk that the downgrades sent out a dangerous message to the financial world. Ian Gordon, an analyst at Investec, said: “Scaremongering is an unhealthy national pastime.”

The markets seemed to agree. The Euro STOXX banks index was up 1.2% Friday afternoon.

However, all this sits at odds with what’s been happening behind the scenes over the last few weeks.